Life Ch 3 Review

Consideration Clause

The Consideration Clause is the policy owner has promised to make premium payments.

Entire Contract Provision

The entire contract provision stipulates that the policy and a copy of the application along with any riders or amendments make up the entire contract.

Non-Forfeiture Options

Because permit whole life insurance policies have cash values certain guarantees are built into the policy that cannot be forfeited by the policyowner. If a whole life policy has cash value in the policy owner wants to surrender the policy, because he does not want it anymore, he must make a decision on what he would like to do with his cash value. The three options are: -Cash Surrender -Reduce Paid-Up -Extended Term

Level Term Insurance

Level Term insurance is the most common type of temporary protection. The word "level" refers to the death benefit that does not change throughout the life of the policy.

Limited Pay Whole Life

Unlike sStraight wWhole Life, Limited Pay is designed so that the premiums for the coverage will be completely paid up well before age 100. Most versions of Limited Pay Life are 20 year pay. Whereby coverage is completely paid for in 20 years. Or Life paid up at 65 whereby the coverage is completely paid up by the insured at age 65.

Increasing Term Policies

Increasing term policies feature level premiums and a death benefit that increases each year. The amount of increase is usually set to a specific amount or percentage.

Key Characteristics of While Life Insurance

Level Premiums, Level Death Benefit, Cash Value, Living Benefits.

Three Basic Types of Term Civerage

Level Term Insurance, Increasing Term Insurance, Decreasing Term Insurance

Collateral Assignment

Collateral Assignment involves a transfer of partiel rights of another person; this is usually done in order to secure a loan. A Collateral Assignment is a temporary assignment. Once the debt or loan is repaid, the rights are returned to the policy owner.

Incontestable Clause

The Incontestable Clause prevents the insurance company from denying a claim because of incorrect information or a concealment of facts after the policy has been in force for two years.

Grace Period Provision

The Grace Period is the period of time after the premium payment is due. The Grace Period is usually 30 days. The purpose of the Grace Period is to protect the policyholder against an unintentional lapse of the policy. If you insured dies during this period the benefit is payable, however a past-due premiums will be deducted from the death benefit.

Policy Loan Provision

The Policy Loan Provision is found only in policies that contain cash value. The policy owner is allowed to borrow an amount equal to the available can value. If there are any outstanding loans at the time of the insured's death, the death benefit will be reduced by the amount of the outstanding loan.

Insuring Clause

The insuring Clause is the insurance company's agreement and promise to pay the death Benefit.

Convertible

A term policy that is convertible allows the policy owner with the right to convert the coverage to a permanent whole life insurance policy without evidence of insurability. The premium for the new whole life permanent policy will be based only on the insured's current attained age.

Renewable

A term policy that is renewable allows the policy owner the right to renew the coverage at the expiration date without evidence of insurability. The premiums for the new term policy will be based only one he insured's current attained age.

Absolute Assignment

Absolute assignment involves transferring all rights of ownership to another person or entity. It is a permanent and total transfer of all the policy rights. The new policy owner does not need to have an insurable interest in the insured.

Reduces Paid Up Option

Under this option the cash value is used to purchase a paid-up whole life policy. The new Whole Life Policy will have a smaller or reduced face amount from the original policy. But there will not be any more premium payments due and it will continue to gain cash value.

Standard Policy Provisions

While there is not a set standard of policy provision in life insurance, the standard policy provisions adopted by the (NAIC), National Association of insurance Commissioners does create uniformity on life insurance policies.

Automatic Premium Loan Provision

The Automatic Premium Loan Provision is commonly added to contracts with cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse of a policy due to the non-payment of premiums. For example, if a policy owner and misses a premium payment the payment is automatically paid using the policies cash value.

Cost of Living Rider

The Cost-of-Living Rider addresses inflation by automatically increasing the amount of insurance without evidence of insurability. The fave value of the policy may increase by the cost-of-living factor tied to an inflation index such as the Consumer Price Index.

Free Look Provision

The Free Look Provision allows the policyowner, if you look at the policy for a specific number of days. The Free Look period starts when the policy owner receives policy from the insurance company in the mail, or is delivered by an insurance agent.

Suiside Provision

The Suiside Provision of a life insurance policy protects insurance companies against people using suiside for a quick payment of the death benefit. If the insured commits suicide within the first two years, the insurance company will not pay the death benefit. They will only return the premiums that have been payed.

Two Types of Policy Assignments

-Absolute Assignment -Collateral Assignment

Policy Riders

Policy Riders are added to the policy and ride along, on the basic life insurance policy. Riders only have value when attached to a policy. they have no independent value. They are added to help people customize their insurance policies for their individual needs. Unlike Policy Provisions, Policy Riders are not free; their cost is added to the life insurance policy premium.

Three Basic Types of Whole Life Insurance

-Straighe Whole Life -Limited Pay Whole Life -Single Premium Whole Life

Straight Whole Life

Straight Whole Life, also called Continuous Premium Whole Life, is a basic whole life policy, where the policy owner pays a fixed premium for the time the policy is issued until the insured's death or age 100.

Term Life

Term life insurance is temporary life insurance provided for a specific period of time. It is also known a pure life insurance. Term insurance is temporary protection because it only provides coverage for a specific period of time. Term policies provide for the greatest amount of coverage for the lowest premiums. Term insurance provides what is known as pure death protection. If the insured dies during the policy term, the policy pays a death benefit to the beneficiary. If the policy in canceled or expires prior to the insured's death, nothing is payable. With term policies, there is no cash value or any living benefits available.

Cash Value

The cash value created by the accumulation of premiums is scheduled to equal the face amount of the policy when the insured reaches age 100.

Level Death Benefit

The death benefit is guaranteed and remains level for the entire lifetime of the policy.

Living Benefits

With a whole life policy, a policy owner can borrow against the cash value while the policy is in effect, or can recieve the cash value when the policy is surrendered. Cash value is also refferend to as Nonforfeiture values.

Dividends

Dividends are paid only on participating policies. When the policy owner purchases the policy from a participating insurance company, they are eligible to receive dividends. When receiving dividends they have the following five options: -Take Dividends in Cash -Apply Dividents against premium payments -Allow Dividends to accumulate interest -Buy Paid Up Additions (Which is a Whole Life Policy) -Purchase one year term insurance

Guaranteed Insurability Rider

The Guaranteed Insurability Rider allows the insured to purchase additional coverage a specific future dates, without the evidence insurability, the new premiums will be calculated only on the person's attained age.

Whole Life

Also called permanent life insurance, he's our policy is to remain in effect to age 100 as long as the premium is paid. Whole life insurance provides lifetime protection that includes a savings element known as cash value. Whole Life policies and out at age 100, which means the cash value created by the payment of premiums is scheduled to equal the face amount of the policy at age 100. Premiums for whole life policies usually are higher than those for term insurance.

Rights of Ownership

The assignment provision specifies the policy owner's right to transfer ownership of the policy.

Reinstatement Provision

The reinstatement provision allows a lapse policy to be put back in force. Of the policy owner elects to reinstate the policy, they will have to provide evidence of insurability, pay all back premiums with interest and may be requited to repay any outstanding loans.

Extended Term Option

Under this option, the cash value is used to purchase a term policy. The new Term Policy will have the same face amount as the original Whole Life Policy and will last for a set period of time based on the amount the cash value available used. And there will not be any additional premium payments due

Single Premium Whole Life

With a Single Premium Whole Life, a onetime lump sum payment is made, which will provide a level death benefit to the insured at age 100. The policy is completely paid up and will generate cash value immediately.

Cash Surrender Option

Take the cash

Misstatement of Age or Sex Provision

Because the age and sex are important factors in figuring your premiums that will be charged for a life insurance policy, this provision allows the insurance company to adjust a policy at any time due to a misstatement of age or gender. In the event of a claim the insurance company is allowed to adjust the death benefit for the premium to the correct age or gender.

Special Features of Term Policys

Most term policies are -Renewable -Convertable -Renewable and Convertible

Decreasing Term Policies

Decreasing term policies feature a level premium and a death benefit that decreases each year. Decreasing term policies are primarily used when the amount of protection needs to decrease over a period of time. The most common use for a decreasing term is to insure the payment of a mortgage. The policy amount decreases as the outstanding mortgage loan balance decreases each year. In a decreasing term policy, the death benefit will be zero dollars at the end of the policy term.

Exclusions

Exclusions are the types of risks that an insurance policy will not cover. The most common exclusions in life insurance policies are: -War -Aviation: Non-Commercial Pilot -Hazardous Occupation of Hobbies -Com.mission of a Felony -Suiside

Waiver of Premium Rider

The Waiver of Premium Rider waives the premium for the policy if the insured becomes totally disabled. Most insurance companies impose a six-month waiting period from the time of disability. The coverage remains in force until the insured is able to return to work. If the insured was never able to return to work, the premiums will continue to be waived by the insurance company. The waiver of premium rider usually expires when the insurer reaches age 65.

Level Premiums

The level premiums for whole life policies are based on the age of the individual, when origionally purchased. Therefore, the premiums remanin the same throughout the entire life of the policy.